KFM Weekly Investment Update: Friday, 11 October 2013

Local Market Summary

• The KSI was up 0.7% to 3,946 and Home index was down 0.6% to 8,175 for the week.

• This week, Teachers Savings and Loans Society Limited (TISA) announced that it would be voting against the proposed acquisition of Credit Corp’s finance and leasing business by Bank South Pacific Ltd (BSP). CCP’s 3rd largest shareholder
announced this ahead of a scheduled extraordinary meeting on the 16th October where shareholders will either accept or reject the offer by BSP.

• The Kina Facility Rate released by the Bank of PNG will remain at 6.25% for the month of October 2013.

• On Tuesday Prime Minister Peter O’Neil announced that PNG would host the 2018 APEC Leaders’ Summit. PNG received over-whelming support by other APEC leaders and this summit would be an opportunity to showcase PNG’s rich culture, robust democracy and tremendous trade and investment opportunities PNG has to offer.

• Esso Highlands Limited has secured an additional US$1.5b (K3.9b) to finance the gas project in PNG. This was reported through a statement by co-venture Oil Search limited (OSH). Financing was sourced from co-venturers and commercial bank lenders. The estimated cost remains unchanged at US$19b and remains on course for the first deliveries of LNG in the second half of 2014.

International Market Summary

• US President Barack Obama nominated Janet Yellen to succeed Ben S. Bernanke as the US Fed Chairman. She supported the Fed’s unprecedented bond buying programs and was a driving force behind a strategy adopted in 2012 to commit the central bank to goals on inflation and unemployment.

• Republicans in the House of Representatives offered a plan on Thursday that would postpone a possible U.S default, signalling new willingness to end a standoff that has shut large parts of the government and thrown America’s future
creditworthiness into question.

• US Stocks on Thursday soared to their biggest one day gains since January as law makers move closer to a deal to break up the political impasse in Washington.

• Australia’s unemployment rate is due to rise in 2014 as the International Monetary Fund (IMF) downgrades growth prospects for the nation. That puts forecast growth at 2.5% for the 2013 calendar year, down from the 3.0% predicted in April. For 2014, the IMF sees Australian growth at 2.8%, rather than 3.3%.

• ASX closed the week on a high. The ASX200 jumped 83.8points or 1.6% to 5230.9

• Newcrest Mining Limited (NCM) announced changes to the Board and Executive, aimed at ensuring an orderly succession process and further strengthening the Company’s leadership team. The changes are the appointment of Peter Hay as the new Chairman of Newcrest upon the retirement of Don Mercer in December 2013 and Sandeep Biswas as Chief Operating Officer, effective 1 January 2014

• Bank of Queensland (BOQ) share price bounced on Thursday sparked by margin and dividend surprises in its 2H13 result. BOQ closed $11.15 from $10.45 a gain of 6.7%. (Refer to graph on the PDF attachement below).

• In currency, the PGK saw a bounce against major trading partners during the week when the BPNG announced that it would intervene in stabilizing the rapid depreciation of the currency. This follows a turbulent few weeks that saw the PNG rapidly decline to some of its lowest levels in a rolling 52 week period against the USD, AUD, GBP and Yen.

• In commodities, Gold broke below the USD1,300 technical support amid improved risk sentiments and higher US yields. Crude Oil prices managed to offset some of Wednesday’s losses. Brent outperformed and gained more than 2% following news that the Libyan PM Ali Zeidan has been detained temporarily by former rebel militia. Light Crude closed the week flat on USD103/bbl and Brent 2.5% higher at USD111.70/bbl.